Using retirement savings to buy a home: necessity or risk?

However, according to real estate market professionals, this decision may carry significant tax implications and long-term financial consequences. In the United States, retirement savings programs such as 401(k) and Individual Retirement Account (IRA) allow individuals to withdraw or borrow a portion of their funds for the purchase of a home. Nevertheless, such an option may be accompanied by tax liabilities, penalties, as well as the loss of potential future investment returns.

“Planning is the most important element in this case,” notes Stephen Kates, financial analyst at Bankrate. As he explains, prospective buyers should carefully assess their financial situation and calculate what they can realistically afford before proceeding with such a move.

Homeownership is becoming increasingly difficult

In recent years, as reported by the Associated Press, rising inflation, high mortgage interest rates and increasing property prices have made home purchases a significant challenge for many households in the United States. At the same time, stock market investments have substantially boosted the value of retirement savings. The S&P 500 recorded only five negative years between 2005 and 2025, contributing to higher balances in retirement savings accounts.

According to data from Fidelity Investments, the average balance across 24.8 million 401(k) accounts reached $146,400 at the end of 2025, marking an increase of 66% over the past decade. At the same time, the average balance in IRA accounts among 18.9 million investors rose to $137,095, up 51% compared with the end of 2015.

The gap between savings and the down payment

Despite the significant growth in savings, many buyers continue to struggle to accumulate the amount required for a home down payment. According to an analysis by Redfin, the median down payment for home purchases in the United States stood at $64,000 in December.

At the same time, the median balances in retirement savings accounts remain significantly lower. Fidelity estimates that the median balance in 401(k) accounts stands at $34,400, while for IRA accounts it is only $10,476. Median figures are typically lower than averages, as many employees who have recently enrolled in retirement savings programs have not yet accumulated substantial capital.

A decision with long-term consequences

According to real estate experts, using retirement savings to purchase a home may provide an immediate solution for those struggling to raise the required down payment. However, they warn that such a decision should be approached with caution.

Early withdrawals from retirement accounts may reduce the long-term returns of investments and affect an individual’s level of financial security after retirement. For this reason, financial advisers recommend careful financial planning and a thorough evaluation of available alternatives before making such a decision.